PEC Barr (Holdings) Ltd v Munro Holdings Ltd - Edinburgh Sheriff Court, 12th February, 2010

Thu, 04 Mar 2010 15:13:18 GMT

The Appellants appealed against the granting of a Winding Up Order that had been made against them on the ground that they were unable to pay their debts.The Appellants had contended that their debt to the Petitioners/Respondents had been extinguished by a payment of £5,000 made in cash by a former employee to the Respondents’ director. The Sheriff had been given Affidavits provided by the employee and also the Respondents’ Director. The Director stated that he had not received the alleged payment in cash.The employee’s Affidavit suggested that a payment had been made. The Sheriff had reviewed the Affidavits and concluded that there was no dispute as to the existence of the debt on substantial grounds and the Winding Up Order had been granted. At the Appeal reference was made to Sections 122 and 124 of the Insolvency 1986, and it was agreed that a Petitioner would not be a creditor and would not be entitled to seek a Winding Up Order if the debtor company showed that the debt was disputed in good faith and on substantial grounds. The Appellants argued that the Sheriff had given no reason for rejecting the employee’s evidence and suggested a number of reasons why that evidence might have been accepted and the evidence of the Respondents’ Director rejected. The Respondents argued that the appeal was an attempt to challenge the exercise of the Sheriff’s discretion and could not succeed unless it was shown that he had gone completely and totally wrong. The Sheriff did not accept that contention and suggested that the issue of whether or not there was a bona fide dispute as to the existence of a debt on substantial grounds was a matter for the exercise of judgement on the basis of material placed before the Court, rather than an exercise of discretion. Nor had the Sheriff been involved in a decision about the employee's credibility. The question for the Sheriff had been whether there was a fair or reasonable probability that there was a defence to the Petition for winding up. The Sheriff Principal concluded that there was little scope for criticising the Sheriff’s decision on the issue of credibility of the two witnesses. The Sheriff had seen not only the Affidavits, but also bank statements showing the history of payments by the Appellants to the Respondents. These showed that on several occasions cheques had not been honoured when presented and two cash payments had been made, but both had been by direct deposit into the Respondents’ bank account. Taken alongside the Director's denial that he had received the cash payment, it seemed to the Sheriff Principal that the Sheriff could not be criticised for reaching the view that he did. The Appeal was refused.

Commercial

PEC Barr (Holdings) Ltd v Munro Holdings Ltd - Edinburgh Sheriff Court, 12th February, 2010